Question

Based on the following information, prepare the statement of cash flows using the indirect method.

                                                               New Guy Company

                                                                    Balance Sheet

                                                                  2019                          2018                 Change

Current assets:

Cash                                                     $108,000                $121,500            ($13,500)

Accounts receivable                               102,000                   141,000              (39,000)

Inventory                                                101,000                     60,000               41,000

Marketable securities                                 4,000                     18,000              (14,000)

Prepaid expenses                                      20,000                     36,000              (16,000)

Long-term assets

Plant & equipment (net)                          296,000                   185,000             111,000

Land                                                          52,000                     31,000              21,000

Patent                                                        53,000                     53,000                  0

Total Assets                                             736,000                     645,500

Current liabilities:

Accounts payable                                     41,000                       34,000                7,000

Interest payable                                        13,200                       22,000               (8,800)

Other accruals                                          22,400                      40,000              (17,600)                 

Tax payable                                               2,500                        10,500               (8,000)

Note payable                                            31,250                       42,000              (10,750)

Long-term liabilities

Mortgage payable                                     81,000                       59,000              22,000

Bond payable                                            77,000                     132,000             (55,000)

Stockholder's equity

Common stock                                         350,000                    250,000             100,000

Paid-in-capital                                           25,000                          0                    25,000

Retained earnings                                      92,650                     56,000                36,650

Total Liabilities and Equity                        736,000                    645,500

                                                  Income Statement

                                    For the Year Ended December 31, 2019

Revenues:

Sales     (All on credit)                                                        $1,020,000

Expenses:

Cost of goods sold                                                      520,050

Depreciation expense                                                   60,000

*Other operating expenses                                           192,000

Interest expense                                                            85,000

Tax expense                                                                 48,000

    Total expense                                                                         905,050

Net Income                                                                                 114,950

*(Includes $15,000 of amortization expense for patent and $20,000 of a lease expense, which is a fixed charge)

Answer 1

Statement of Cash Flow (indirect method):
	Amount $
Cash from Operating Activities:
Net Income	114950
Add: Depreciation	60000
Add:Amortisation	15000
Change in Working Capital:
add: decrease in AR	39000
less:increase in Inven	-41000
add: decrease in M Sec.	14000
add: decrease in Prep. Exp	16000
add:increase in AP	7000
less: decrease in Int Pay	-8800
less:decrease in oth Acc	-17600
less: decrease in TP	-8000
less: decrease in Note pay	-10750
Cash inflow from Operating Activities	179800
Cash from Investing Activities:
less: Purchase of P&E	-171000	(111000+dep 60000)
less:purchase of land	-21000
less:purchase of patent	-15000	(0+amort. 15000)
Cash outflow of Investing Activities	-207000
Cash from Financing Activities:
add: increase in Mort.P.	22000
less:payment of Bond	-55000
add:issuance of shares	125000
less:payment of dividends	-78300	(Ret op. 56000+ N.Inc. 114950- Ret cl. 92650)
Cash inflow from Financing Activities	13700
Total Cash outflow of all activities	-13500
Add:Opening Cash	121500
Closing Cash	108000